U.S. hedge funds are betting against the stock market despite the current rally in equities.
Net short positions against S&P 500 futures by hedge funds have reached a record $107 billion
U.S., according to calculations by French bank BNP Paribas (BNPQY). Shorting the S&P 500 is
a common strategy to bet against the stock market in the U.S.
The bearish bets have accumulated even as the S&P 500 has rallied for four consecutive
weeks, rising 17% from a 52-week low reached on June 16.
Economic data pointing to easing inflation has led investors to anticipate that the U.S. Federal
Reserve will slow its pace of interest rate increases.
The current rally has caused problems for some hedge funds, with many forced to cover their
short bets as stock prices rise, further fueling the rally in equities.
Since the S&P 500's June low, short sellers have covered $45.5 billion U.S. of their short
positions, according to data from S3 Partners. The largest amount of short covering in dollar
terms has occurred in technology stocks.
Many professional traders on Wall Street believe that inflation peaking is not enough to sustain
the current rally and that stocks will fall again this autumn.
Year-to-date, the benchmark S&P 500 index is down 11% despite the rally that’s taken place
over the past several weeks.
